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SMSF trustees go for gold

Topics [ SMSF ]

The Perth Mint was proud to participate in last week’s SMSF Association National Conference in Melbourne. The conference hosted more than 1,600 attendees, the vast majority of whom are service providers to the AUD700 billion and growing SMSF industry, including financial planners, accountants and auditors.

Throughout the three-day event there was huge interest in The Perth Mint’s range of investment products, from our depository solutions to traditional physical bars and coins, and the smartphone app GoldPass®. Using the latest technology, GoldPass® allows investors to securely trade, transfer and store physical gold via digital certificates.

There were also a lot of inquiries regarding our listed investment offerings. These include our ASX listed product PMGOLD, which has been trading since 2003, and our recently launched physical gold ETF, ticker code AAAU, which trades on the New York Stock Exchange.

For those interested to learn more about our investment solutions, this recently published blog covers the many ways in which The Perth Mint meets the diverse needs of the world’s bullion investors: How to buy gold: simple, safe and secure options available at The Perth Mint

From our discussions with the many financial intermediaries and direct investors who visited our booth over the course of the conference, it became clear there are three primary factors driving the increased interest from SMSF trustees in gold, silver and precious metals more generally: 

 • Increased stock market volatility. The Q4 2018 sell off in equity markets helped drive safe haven demand for precious metals, with USD and AUD gold prices now back above USD1,300oz and AUD1,800oz respectively; 

 • Continued concerns regarding a potential decline in the AUD. This has fallen from USD0.78 to USD0.72 in the past year. Any further falls will boost the price of gold denominated in AUD. 

 • The potential for interest rates in Australia to move lower in 2019 and beyond. Up until late last year, market pricing suggested the next move in domestic interest rates was likely to be an increase. The situation today is not so clear given volatility in financial markets, decelerating growth rates across the globe and a more cautious tone from some of the most influential central banks, including the Federal Reserve. All of these issues are impacting on the outlook for monetary policy in Australia. Indeed markets are now pricing in at least one more interest rate cut from the RBA, with expectations that the cash rate will decline to 1.25% by next February. 

Should domestic interest rates be cut, and should this occur alongside a decline in the value of the AUD with a continued period of heightened stock market volatility, the outlook for gold, in terms of its price and demand for physical bullion, is bright. 

This is due to the fact that gold is the one asset which typically outperforms other investments when the value in equity markets falls. It has a long history of strong returns whenever real cash rates are low due to the reduced opportunity cost of holding a non-income bearing asset. 

Coupled with its tangibility and its high liquidity, the attributes outlined above help explain why gold can play a vital role in any diversified portfolio, including those of the one million plus Australians who manage their superannuation through a SMSF. 

Until next time…

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